5 Stocks Insiders Love Right Now

WINDERMERE, Fla. ( Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.

At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity, but it's twice as important to make sure the trend of the stock coincides with the insider buying.

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One stock that insiders are jumping into here is Nature's Sunshine Products ( NATR), which produces nutritional supplements and related products. Insiders are buying this stock into modest strength, since shares are up 7% so far in 2013.

Nature's Sunshine Products has a market cap of $244 million and an enterprise value of $173 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 9.72 and a forward price-to-earnings of 9.84. Its estimated growth rate for this year is -7.5%, and for next year it's pegged at 6.8%. This is a cash-rich company, since the total cash position on its balance sheet is $81.31 million and its total debt is just $5.62 million.

From a technical perspective, NATR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last few weeks, with shares moving higher from its low of $13.21 to its recent high of $15.86 a share. During that move, shares of NATR have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NATR within range of triggering a near-term breakout trade.

If you're bullish on NATR, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $14.35, and then once it breaks out above some near-term overhead resistance at $15.86 a share with high volume. Look for a sustained move or close above $15.86 a share with volume that hits near or above its three-month average action of 37,782 shares. If that breakout triggers, then NATR will set up to re-test or possibly take out its next major overhead resistance levels at $17 to $17.50 a share. Any high-volume move above $17.50 will then put $18.21 to $20 into range for shares of NATR.

Quantum

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A stock in the computer storage devices complex that insiders are active in here is Quantum ( QTM), which specializes in backup, recovery and archive solutions. It provides a comprehensive range of disk, tape and software solutions. Insiders are buying this stock into modest strength, since shares are up 7% so far in 2013.

Quantum has a market cap of $321 million and an enterprise value of $500 million. This stock trades at a premium valuation, with a forward price-to-earnings of 44.50. Its estimated growth rate for this year is -141.7%, and for next year it's pegged at 160%. This is not a cash-rich company, since the total cash position on its balance sheet is $51.34 million and its total debt is $205 million.

From a technical perspective, QTM is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways for the last four months, with shares moving between $1.18 on the downside and $1.47 on the upside. Shares of QTM have just started to bounce off its 50-day at $1.31 a share and are quickly moving within range of triggering a near-term breakout trade above the upper end of its recent sideways trading pattern.

If you're in the bull camp on QTM, then look for long-biased as long as this stock is trending above its 50-day at $1.31 and then once it breaks out above some near-term overhead resistance levels at $1.46 to $1.47 a share and its 200-day at $1.48 a share with high volume. Look for a sustained move or close above those breakout levels with volume that hits near or above its three-month average action of 1.68 million shares. If that breakout triggers, then QTM will set up to re-test or possibly take out its next major overhead resistance levels at $1.70 to $1.77 a share. Any high-volume move above those levels will then put $2 to $2.20 into range for shares of QTM.

Express Scripts

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A health care stock that insiders are snapping up shares in here is Express Scripts ( ESRX), which offers health care management and administration services such as managed care organizations, health insurers, workers' compensation plans and government health programs. Insiders are buying this stock into decent strength, since shares are up 10% so far in 2013.

Express Scripts has a market cap of $48 billion and an enterprise value of $62 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 33.92 and a forward price-to-earnings of 12.09. Its estimated growth rate for this year is 14.2%, and for next year it's pegged at 15.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.79 billion and its total debt is a whopping $15.92 billion.

From a technical perspective, ESRX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last five months, with shares soaring higher from its low of $49.79 to its recent high of $60.08 a share. During that uptrend, shares of ESRX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ESRX within range of triggering a major breakout trade.

If you're bullish on ESRX, then look for long-biased trades as long as this stock is trending above its 200-day at $57.28 or its 50-day at $56.06 and then once it breaks out above some near-term overhead resistance at $60.08 a share with high volume. Look for a sustained move or close above $60.08 a share with volume that registers near or above its three-month average action of 5.96 million shares. If that breakout triggers soon, then ESRX will set up to re-fill some of its previous gap down zone from last November that started at $63 a share. Any high-volume move above $63 will then put $65 to $66 into range for shares of ESRX.

Allscripts Healthcare Solutions

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A software compnay that insiders are buying a decent amount of stock in is Allscripts Healthcare Solutions ( MDRX), a provider of clinical, financial, connectivity and information solutions and related professional services that empower hospitals, physicians and post-acute organizations to deliver world-class outcomes. Insiders are buying this stock big time strength, since shares are up 44.5% in 2013.

Allscripts Healthcare Solutions has a market cap of $2.34 billion and an enterprise value $2.72 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 15.81. Its estimated growth rate for this year is 4.5%, and for next year it's pegged at 22.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $103.96 million and its total debt is $444.28 million.

From a technical perspective, MDRX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last three months, with shares soaring higher from its low of $8.85 to its recent high of $13.88 a share. During that uptrend, shares of MDRX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MDRX within range of triggering a major breakout trade.

Traders should now look for long-biased trades in MDRX as long as it's trending above some key near-term support at $13 to $12 a share and then once it breaks out above some key overhead resistance levels at $13.88 to $14.23 a share with high volume. Look for a sustained move or close above those breakout levels with volume that hits near or above its three-month average action of 3.91 million shares. If that breakout triggers soon, then MDRX will set up to re-fill some of its previous gap down zone from last April that started at $16 a share. Any high-volume move above $16 will then put $18 to $20 into range for shares of MDRX.

Akamai Technologies

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One more stock to consider is Akamai Technologies ( AKAM), which provides services for accelerating and improving the delivery of content and applications over the Internet, from live and on-demand streaming videos to conventional content on Web pages to tools that help people transact business. Insiders are buying this stock into weakness, since shares are off by 13% so far in 2013.

Akamai Technologies has a market cap of $6.3 billion and an enterprise value of $5.7 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 31.62 and a forward price-to-earnings of 16.10. Its estimated growth rate for this year is 6.6%, and for next year it's pegged at 14%. This is a cash-rich company, since the total cash position on its balance sheet is $437.32 million and its total debt is zero.

From a technical perspective, AKAM is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending for the last two months, with shares falling from its high of $39 to its recent low of $34.26 a share. During that downtrend, shares of AKAM have been mostly making lower highs and lower lows, which is bearish technical price action. That said, AKAM has started to rebound off that $34.26 low and is now quickly moving within range of triggering a near-term breakout trade.

If you're bullish on AKAM, then look for long-biased as long as this stock is trending above some near-term support at $34.26, and then once it breaks out above some near-term overhead resistance at $35 and above its 200-day moving average at $36.42 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 3.87 million shares. If that breakout hits soon, then AKAM will set up to re-test or possibly take out its 50-day moving average of $38.03 a share. Any high-volume move above its 50-day will then put $39 to $40 into range for shares of AKAM.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.